Insurance is a complex field. The underwriting of an insurance contract between an applicant and an insurance carrier often involves a plurality of participants, each of whom plays a well-defined role in the complex underwriting process. To facilitate discussion, FIG. 1 depicts in a simplified diagram the various participants involved in a typical insurance sales and underwriting process. In FIG. 1 and the figures herein, a life insurance contract for a natural person is employed as an example. However, the information disclosed herein applies equally well to other types of insurance contract and/or to other types of insurance customer, i.e., irrespective whether the customer is a natural person or a legal or physical entity such as a corporation, a building, etc.
In the life insurance industry alone, for example, there are currently between 200,000 and 250,000 licensed agents. These agents, shown as agents 102, 104, and 106 in FIG. 1, perform many customer interface functions. For example, agents may prospect for potential customers, provide information to potential customers about various insurance products, and interact with the customers to initiate the underwriting process once the customers decide on one or more insurance products.
During the underwriting process, an agent may work with his customer, now an applicant, to obtain necessary information and/or biological specimens, and may answer any questions that the applicant may have about the proposed insurance contract and/or the underwriting process. After the insurance contract is approved by the carrier and executed by the applicant, it becomes a policy in force, and the applicant, now the insured, may continue to interact with the agent to update his personal information from time to time, to make a claim against the policy, and/or to obtain any further information about the insurance policy and/or any other insurance offerings.
Generally speaking, an agent may work for or through one or more agencies. Some agents may work for a single insurance agency (such as in the case of agents 102 and 104 with respect to an agency 108). These exclusive relationships between agents 102 and 104 with respect to agency 108 are indicated by reference numbers 114 and 116 respectively. Other agents may work for multiple agencies, such as in the case of an agent 106 with respect to agencies 108, 110, and 112. These relationships between agent 106 and agencies 108, 110, and 112 are enumerated by reference numbers 118, 120, and 122, respectively. An agent may chose to work with multiple agencies to broaden his product offerings since an agency typically represents only a limited number of insurance carriers.
During the insurance underwriting process, agencies may rely on third-party service providers (124, 126 and 128 in FIG. 1) to perform various tasks, such as to obtain a health history of an applicant, and to obtain blood pressure readings, blood samples and/or any other metrics required to evaluate the insurance contract proposed. In the United States, the market for service providers is dominated by about two dozen large service providers. Generally speaking, the orders for such service come primarily from the agencies although some may come from the insurance carriers. Examples of these relationships are shown by reference numbers 140, 142, 144, and 146. As before, an agency may work with as many service providers as necessary to fulfill the requirements of an insurance contract and/or to fulfill its obligations to the insurance carrier interested in insuring the applicant. Similarly, insurance carriers can work with as many service providers as desired.
Insurance companies or insurance carriers 150, 152, and 154 represent the entities that evaluate a proposed insurance contract in view of the information gathered by the agent, his agency, and/or one or more service providers, and to decide on an applicable rate and/or insurance policy limit. There are hundreds of insurance carriers offering life insurance products in the United States. Insurance carriers have relationships (160, 162, 164, 166, 168, and 170) with service providers (e.g. 124, 126, and 128), since it is customary (but not absolutely required) that insurance carriers pay for the services furnished by the service providers irrespective whether the service orders originated from the agencies (e.g., 108, 110, or 112) or from the insurance carriers.
Generally speaking, insurance carriers work with agents through agencies. Accordingly, an insurance carrier generally has a contract with one or more insurance agencies, which contract governs the relationship between the insurance carrier and the insurance agency(ies). These contractual relationships are enumerated in FIG. 1 by reference numbers 180, 182, 184, and 186. The contract may include terms such as the insurance products an agency may sell, its geographical territory, the commissions payable to the agency for a successfully sold insurance policy, and the like. Although insurance carriers rarely work directly with agents, it is customary that an insurance carrier notify a state's insurance department of the appointment of an agent, in effect informing the state's regulatory agency about the agents representing its product lines before the public in that state.
From a contractual standpoint, the participants depicted in FIG. 1 deal with one another at arms length. In practical terms, many of these participants in the insurance underwriting process work with other participants in endless permutations. As will be discussed in connection with FIG. 2, this fact currently contributes to a huge amount of wasted and/or duplicate effort and inefficiency in the insurance underwriting and management process.
FIG. 2 shows in a simplified diagram a typical insurance underwriting cycle. The cycle starts with a customer 202 contacting an agent 204 to request information about insurance. Agent 204 may have identified customer 202 through his contacts or via his prospecting program, or customer 202 may have been referred to agent 204 by an agency and/or an insurance carrier. During this pre-sale period, agent 204 typically provides insurance information to customer 202, answers any questions that may specifically apply to customer 202, and/or clarifies any information to entice customer 202 to apply for insurance. Since agent 204 earns a commission on each successfully completed insurance policy, agent 204 typically has a vested interest in getting customer 202 to fill out an application and in following up with other participants in the underwriting process to ensure that the application timely matures into a valid insurance policy.
If the insurance product offered is of interest to customer 202, customer 202 fills out an application, generally in the form of a questionnaire that is designed to solicit certain preliminary information from the applicant. The information to be provided may include the name of the applicant, his birth date, any governmental form of identification such as his driver license number and/or his social security number, his age, certain lifestyle data, superficial medical history, and the like. Agent 204 then forwards the application to agency 206, which is an agency representing the insurance product of the insurance carrier that the applicant is interested in.
Generally speaking, agency 206 at this point takes in the application, performs certain administrative quality-control checks such as to ensure that the submitting agent can in fact sell the insurance contract proposed, that all questions in the application have been filled out, that the application is properly signed. Once the preliminary quality-control checks are completed, agency 206 then forwards the application to both service providers 208 and an insurance carrier 210. Typically, the service provider gets specific orders based on the requirements of the carrier that offers the applied for insurance coverage.
The transmission of the application may be made using traditional paper and mailing methods, or may involve the electronic transmission of text/images. After the application has been transmitted, agency 206 continues to monitor the application progress to ensure that the service provider(s) timely perform the requested services and that the application is timely acted upon by the insurance carrier once all the information required by the insurance carrier is obtained.
Service provider 208 may provide various administrative and/or paramedical services. For example, service provider 208 may obtain a health history (e.g., an Attending Physician Statement or APS) from the applicant's physician to be forwarded to insurance carrier 210. As another example, service provider 208 may obtain blood and urine samples from the applicant, and forward the samples to a laboratory 212 for analysis. The results of the analysis by laboratory 212 may be sent back to service provider 208 for forwarding to insurance carrier 210, or, more likely, laboratory 212 may send such analysis directly to insurance carrier 210.
After insurance carrier 210 collects all the requisite information from agency 206, service provider(s) 208, laboratory(ies) 212, and any other participants in the insurance underwriting process, insurance carrier 210 may begin the risk assessment process to determine the probability of whether and when the proposed insured (i.e., the applicant) would likely be making a claim. For life insurance contracts, this risk assessment generally relates to deciding the expected mortality of the applicant in view of the information obtained. Once risk assessment is completed, insurance carrier 210 may then place the applicant in a premium class, which determines the cost of the proposed insurance contract for the applicant given the applicant's own unique circumstances and the proposed insurance limit amount(s).
This premium and/or insurance limit information is transmitted to agency 208 and in turn to agent 204 to be discussed with customer 202. If customer 202 approves, the customer may execute the insurance contract at that point. At this point, the executed insurance contract becomes an enforceable insurance policy, thereby completing the insurance underwriting process.
As can be appreciated from the foregoing, the insurance underwriting process is a complex process requiring information from and coordination with numerous participants in a predetermined sequence. For years, the insurance industry has been underwriting millions of insurance contracts, and has developed techniques for obtaining the necessary information to converting a pending application into a premium-generating policy. However, it is observed by the inventors herein that the current process for insurance underwriting is extremely inefficient and time-consuming. At every step in the chain, there is a significant amount of duplication of efforts and inefficiency.
As one example, agencies, service providers, and carriers often have their own proprietary software for processing and tracking cases (i.e., applications). This is particularly true for independent agents and/or independent agencies and/or service providers. Accordingly, the information transmitted from one participant to another often comes in disparate packages, and often needs to be re-transcribed or translated at every step to simply accomplish data entry.
Additionally, the insurance carrier and/or service providers often receive disparate information related to a case at different times. A significant amount of effort must be spent correlating received pieces of information, all belonging to different cases and arriving at different times. Current industry practice employs the applicant's name and/or date of birth and/or some form of government identification such as an applicant's social security number for correlation. Yet, it is not unusual that one of the participants along the chain mis-transcribes a name, a birth date, and/or a social security number, giving rise to confusion for other participants down the chain.
The lack of coordination gives rise to inefficiency. If a certain amount of time has passed and the insurance carrier still has not received, for example, laboratory results pertaining to a particular applicant, the customary way to resolve the problem is for an insurance carrier employee to call or email the agency in charge of the case, asking the agency to contact the responsible service provider to ask the service provider to contact the laboratory and request that the laboratory forward the laboratory analysis to that carrier. This manner of problem resolution of course requires that there be a human being at each participant to handle the call and/or email and to manually resolve the problem.
For service providers, there is no efficient way to receive service orders from different agencies and/or insurance carriers. Again, information from different agencies and/or insurance carriers must be re-transcribed for data entry into the service provider's own order management and tracking software. If an applicant has a special requirement (such as a female applicant requesting that her physical examination be conducted with a female nurse), such information must often be processed manually. Service providers also have difficulties getting status information regarding a particular case from the various laboratories. If a vial of blood sample breaks during transmit, and the result is not transmitted to the insurance carrier timely, the service provider may not know until it receives a call from the agency, asking why the insurance carrier has not received the requisite test result. Under this paradigm, the aforementioned problem in correlating information means that a service provider must not only devote human resources to correlate data received from the various agencies but must also devote human resources to answer calls and/or emails from agents, agencies, and insurance carriers about the progress and/or status information on service orders.
Agencies and agents are compensated when the underwriting process completes. Accordingly, agents and agencies are particularly anxious in finding out status data regarding a case, in determining whether additional information is needed to move a case along, whether that information can be provided by the service provider, the applicant, or by the insurance carrier. Given the different participants involved, with each participant employing its own proprietary software to process and monitor cases, there is no easy way for agents and agencies these days to easily monitor the status information pertaining to a case as it moves among the participants, particularly after the case has been forwarded to the service providers and the insurance carrier. More importantly, agents serve as the customer interface function, and the inability to quickly obtain status information in order to meaningfully respond to status inquiries from applicants significantly lowers customer satisfaction. In some cases, the applicant may be sufficiently frustrated about the delay and lack of information to terminate the process with an agent, opting to reapply for insurance with a different agency that can underwrite the policy in a shorter amount of time. In some cases, the applicant may simply quit the process entirely out of frustration.
Perhaps the most visible manifestation of the inefficiency of the current underwriting process can be seen in the average and standard deviation values for the time required to complete a typical life insurance underwriting cycle. According to some industry sources, a typical life insurance contract underwriting cycle currently requires over two months to complete. It is not unusual that some applications take as long as 180 days to complete. From an applicant perspective, the delay is especially frustrating, especially since meaningful status information is difficult to obtain from his agent. From the perspectives of the agents and agencies, the delay means that they are getting paid late for the work done months earlier. For insurance carriers, the inefficiency translates into additional cost in processing each proposed insurance contract. The lengthy insurance underwriting cycle also delay the point in time where an insurance carrier can deem a pending insurance contract a premium-earning policy.
In view of the foregoing, improved methods and arrangements for underwriting and managing insurance policies among the various participants are desired.